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When Does Buying A Term Insurance Makes Sense ?


Basically there are just 2 types of life insurance products anywhere in the world, though there are endless variants of both these types :

1.Term Insurance

2.Endowment Plans.

The second kind has a savings/investment component, the first doesn’t.

An oft repeated thumb-rule in the financial advisory trade, is to generally recommend that clients simply buy term insurance for their protection needs and look to mutual funds etc. for their investment needs. Combining protection and investment, according to this school of thought ,leads to sub-par results on both fronts.

My advice is a bit more nuanced. As long as a person can afford it, I recommend certain Endowment Plans, such as the now withdrawn Whole Life Policy of the LIC , over Term Plan+ MutualFunds or Term Plans+ PPF etc. I believe that such plans make for excellent investments returns-wise and tax-wise and allow people to enjoy predictability and stability in their wealth portfolio over many decades. Along with the flexibility to change plans as and when required.

However, I do believe that Term Plans have an extremely important place in one’s finances. Following are situations when you must absolutely opt for Term Plans:

1.If you are a wage/salary earner with a large number of dependents and have no large income from assets or businesses ,no stock-pile of assets that can be cashed in or otherwise tapped to provide for your dependents, the first thing you must do is sit down with a term insurance calculator and figure out just how much money you need to somehow find the money to afford the term insurance you need to provide for your dependants in case of your sad demise. You are ultimately their only hope for a better future.

2.Should you decide to become self-employed, or tap into assets such as your home to borrow the money to set up a business, make certain you have enough Term Insurance to cover your loans and business liabilities, especially if you have not thoroughly segregated your personal and family assets from your business assets.

3.Adequate keyman insurance for personnel crucial to the survival of your business.

4.If you are taking out  huge mortgages to finance home purchases, you can consider a term insurance to cover repayment in case of your demise. However, I find that mortgage insurance/home-loan insurance often works out cheaper and is often available to older people who might no longer be eligible for Term Insurance or larger sum assureds in case of Term Insurance.

So Term Insurance has its time and place in your financial life. Use it wisely as needed.

 

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Designing Your Retirement


wealthymattersI think it a pity that so many Indians are so worried about retirement Link. For a few years now, I could have simply decided to quit all work and live off the income from my assets . It’s a different matter that I choose to work . I find personally meaningful work, one of the biggest sources of pleasure in my life.

Perhaps my approach of planning and providing for retirement will help many more people quit worrying about  it. So here it is :

1.First ask yourself if you wish to ever fully retire. When ?

2.Then ask yourself where you wish to live upon retirement ? Or would you really prefer to live a gypsy’s existence, going wherever your fancy takes you.

3.What are the plans, wishes and expectations of the rest of your family ,even as you retire ?What do you think of these claims ?How would accommodating their needs modify your plans? Read more of this post

Measuring The Moat


wealthymattersIf a competitor had unlimited resources , how quickly could they duplicate the company’s competitive advantage ?

The Opportunity In Blockchains


wealthymattersMany years into the deployment of the internet, many believed that it was still a fad. Since then, the internet has become a major part on our lives, from how we buy goods and services, to the ways we network and how we participate in the political system.There are many parallels between this and cryptocurrencies and blockchains today:

Like the internet, cryptocurrencies such as Bitcoin are driven by advances in core technologies along with a new, open architecture — the Bitcoin blockchain. Like the internet, this technology is designed to be decentralized, with “layers,” where each layer is defined by an interoperable open protocol on top of which companies, as well as individuals, can build products and services.

Like the internet, in the early stages of development there are many competing technologies, so it’s important to specify which blockchain you’re talking about. And, like the internet, blockchain technology is strongest when everyone is using the same network, so in the future we might all be talking about “the” blockchain. Read more of this post

Why Invest Conservatively ?


wealthymatters

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